Supporting local capital market and currency in Tunisia

The European Bank for Reconstruction and Development (EBRD) has supported the new modelling of a sovereign benchmark yield curve in Tunisia, a building block for developing capital markets in Tunisian dinar. The new curve was presented today in Tunis to the main stakeholders, including government officials, banks, primary dealers, brokers, and legal and accounting experts.

As of 1 January 2018 market participants in Tunisia will start recording eligible portfolios at fair value, a transformational move that will align the market with international standards. The EBRD supported the Ministry of Finance, the Central Bank of Tunisia, the Financial Market Council and Tunisie Clearing, in building a data-based dynamic yield curve model that reflects market activity. This will support growth and liquidity in the government bond market and serve as a reference for the pricing of sovereign and corporate bond instruments denominated in Tunisian dinar.

The dynamic model captures data from money markets, and from the primary and secondary sovereign market with a view to faithfully reflecting yield curve movements across maturities every day. The curve will be updated daily, according to the EBRD.

The creation of a sovereign yield curve is aligned with the Memorandum of Understanding (MoU) signed with the Ministry of Finance of Tunisia in May 2016 as part of the EBRD’s SME Local Currency Programme. The MoU stresses the importance of further developing local currency sources of funding and capital markets in the country. In addition to providing affordable loans in Tunisian dinar for small and medium-sized enterprises (SMEs), the EBRD is assisting the country in implementing necessary reforms.

Christelle Fink, EBRD Head of Local Currency and Capital Market Development in the Southern and Eastern Mediterranean region, said: “The sovereign yield curve helps market participants to position themselves and to value their positions and instruments in the market. Publishing a well-modelled yield curve creates an important reference point for all market participants, contributing to transparency in price discovery and valuation of financial instruments. The Ministry of Finance, the Central Bank of Tunisia, the Financial Market Council and Tunisie Clearing worked jointly on this big step forward, for which the Bank is delighted.”

Since September 2012, when EBRD operations began in Tunisia, the Bank has invested €390 million through 27 projects in the country. Supporting the regional development of the country outside Tunis is a priority for the Bank and the EBRD therefore opened a second office in Sfax in October 2016.